Posted on 07/06/2005 2:41:59 PM PDT by traumer
Dow Drops 101, Nasdaq Loses 10 As Fears of Refining Shortages Push Oil Prices Past $60 a Barrel
NEW YORK (AP) -- Stocks tumbled Wednesday as oil prices climbed to a new record on fears of refining shortages and caused investors to look past a report showing strong growth in the service sector of the economy. The Dow Jones industrials dropped more than 101 points.
Oil closed above $61 per barrel for the first time as investors worried that Tropical Storm Cindy would hurt production in the Gulf of Mexico and refinery capacity along the coast. Reports of power outages at two Valero Energy Corp. refineries heightened investors' fears. A barrel of light crude settled at $61.28, up $1.69, on the New York Mercantile Exchange.
A spike in activity in the service sector failed to stem the losses. The Institute for Supply Management's services index for June came in at 62.2, higher than the 58.9 economists had expected and better than May's 58.5 reading.
"There are a number of cross currents in the market right now that make it difficult to find a direction," said Michael Sheldon, chief market strategist at Spencer Clarke LLC. "The services report was a very pleasant surprise, and added to generally positive economic data. But then you have oil, which could slow the economy."
The Dow fell 101.12, or 0.98 percent, to 10,270.68 after rising 68 points Tuesday.
Broader stock indicators also fell. The Standard & Poor's 500 index was down 10.05, or 0.83 percent, at 1,194.94, and the Nasdaq composite index lost 10.10, or 0.49 percent, to 2,068.65.
Bonds gained ground after a strong selloff in the previous session. The yield on the 10-year Treasury note fell to 4.07 percent from 4.10 percent late Tuesday.
Optimism about the U.S. economy pushed the dollar to an 11-month high against the Japanese yen. The greenback lost ground against the euro and other major currencies. Gold prices rose.
Even as the dollar rises, oil prices have continued to climb as well -- confounding investors trying to determine the economy's direction. While the Labor Department's job creation report on Friday and the first wave of second-quarter earnings next week should clarify matters, the markets will have very little impetus to move higher until then.
Valero Energy dropped $1.46 to $83.50 after the company said the outages would reduce oil refining capacity slightly. Global demand for oil and distillates have threatened to overtake supply, and any reduction in refining capacity is seen as pressure on crude futures. But despite Wednesday's market losses, analysts said bigger problems may lie ahead for the economy.
"The thing here is that crude oil prices at $60 just isn't new anymore," said Chris Johnson, manager of quantitative analysis at Schaeffer's Investment Research in Cincinnati. "The longer it stays up here, the more the market gets used to it. Now, when we see second-quarter earnings, and we're getting some grumblings about oil affecting the bottom line, that'll be a true test."
Some investors also were nervous since the government's weekly energy inventory report, usually released on Wednesday, was delayed a day by the Independence Day holiday.
PacifiCare Health Systems surged $4.41 to $77.09 after the company confirmed it would be acquired by UnitedHealth Services Inc. in a $8.1 billion cash-and-stock deal. It was the second-biggest acquisition ever recorded in the healthcare sector. UnitedHealth added 27 cents to $53.50.
American International Group Inc. named former Securities and Exchange Commission Chairman Arthur Levitt as a special adviser to the board of directors as the company struggles to emerge from an accounting scandal. AIG nonetheless lost 35 cents to $59.14.
Halliburton Inc. fell 93 cents to $48.71 even after the U.S. Army awarded the company a $4.97 billion contract to provide logistics support in Iraq. The contract is $1 billion more than the previous year.
General Motors Corp. won a $253 million judgment from the federal government in connection with an underfunded pension plan, The Wall Street Journal reported, though the government is likely to appeal. GM dropped 58 cents to $34.22.
Regional bank Zions Utah Bancorp lost $4.69 to $68.67 after it announced it would buy Texas bank Amegy Bancorp Inc. for $1.7 billion in cash and stock, or $23.32 per share. Amegy fell $1.05 to $21.93.
Declining issues outnumbered advancers by nearly 4 to 3 on the New York Stock Exchange, where preliminary consolidated volume came to 1.89 billion shares, compared with 1.77 billion traded on Tuesday.
The Russell 2000 index of smaller companies was down 4.96, or 0.76 percent, at 648.27.
Overseas, Japan's Nikkei stock average fell 0.11 percent. In Europe, Britain's FTSE 100 was up 0.76 percent, France's CAC-40 gained 0.64 percent for the session, and Germany's DAX index rose 0.26 percent.
Congress should quickly pass the Presidents energy bill, and quickly reduce our dependence on oil imports. The clean natural gas and coal resources of our western basins are unbelievable. At least $100 trillion dollars in natural gas, coal resources and oil reserves out there. With new refineries, it's a win-win scenario for the usa.
It's sure gonna be expensive for ole Chuckie Shuuumah to wage a war on the administration if the price of oil keeps a risin.
This is getting stupid.
Almost $2.30 here in RI for a gallon of regular - this situation is slowly starting to get out of hand.
When you import 60% of ANYTHING that you use--what do you think that dependence will lead to price-wise?? And to think that most people are surprised and upset that oil is that expensive? Amazing!
A thunderstorm affects the price of oil. They used to wait and see if there were any actual damage. It's getting kind of antsy in the market of our civilization's lifeblood.
Looks like the oil market is predicting a hurricane in the GOM.
I'd recommend building several oil refineries, and a few nuclear power plants as well, and open up the ANWR; but those are smart ideas, so no one in charge will pay attention/sarcasm off;)
Shoot the seven sisters first. They're the antithesis of a free trader.
We will see our next recession in 2006. The economy can't buffer this winter with skyrocketing gas and heating bills. Discretionary spending is going to tank, but you won't see retailers really panic until they realize that Christmas sales are super low.
As soon as you can walk through a firestorm of .308, darling.
Total dependence on a foreign supply of a product that your entire economy is completely dependent on,,,is much, much, MUCH different than importing discretionary items like clothes, autos, electronics, toys, etc.
Total dependence on a foreign supply of a product that your entire economy is completely dependent on,,,is much, much, MUCH different than importing discretionary items like clothes, autos, electronics, toys, etc.
oops...sorry about the double post.
When is ANWAR going to start up?????????/
That is a very valid distinction. It will not kill us, it will just make us poorer.
About 6 months after oil tops out in the low hundreds.
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